Billy Busch targets Bud drinkers with new beer

ST. LOUIS • At opposite ends of the long wooden
bar at O’Connell’s Pub, two men work the lunchtime crowd — offering
smiles, handshakes and free beer.

One is Jim Hoffmeister, a former top executive at Anheuser-Busch
Cos. The other is William K. “Billy” Busch, a son of August
“Gussie” Busch Jr., the man who turned Budweiser into the nation’s
dominant beer brand.

Hoffmeister, a near four-decade veteran of A-B, and Billy Busch,
a scion who never worked for the company, are doing something that
neither has done in a long time: peddling beer door-to-door.

“I hit three places last night,” Hoffmeister said, standing near
the bar. “It feels good to be back in the beer business.”

The business now, though, is selling Kräftig, a new brand that
Busch, with the help of Hoffmeister and two other former A-B
executives, launched this month under the banner of the William K.
Busch Brewing Co.

Kräftig is the first beer brewed by anyone with the Busch name
since A-B was taken over by Belgian brewing giant InBev three years
ago, and it is being introduced with high ambitions. The goal: to
brew beers that will compete with national brands, including the
ones that made the Busch family fortune.

“There’s still a lot of loyalty with a lot of family members,”
Busch said, sitting in an O’Connell’s booth. “But for me,
personally, the loyalty isn’t there.”

Kräftig has already brewed 7,200 barrels, or about 100,000
cases. It aims to brew 2 million barrels every year, the bulk at a
brewing facility it plans to build in St. Louis within three years.
Hoffmeister, the company’s chief executive, mentions “4 or 5
million barrels” as if that were almost a given.

“When Billy and I first started talking,” he says, “I wasn’t
interested in 200,000 or 300,000 barrels.”

Schlafly, St. Louis’ largest craft brewer, by comparison, plans
to brew 50,000 barrels next year. But even a few million barrels
represents a tiny fraction of what the biggest beer companies bring
to market — A-B InBev shipped nearly 102 million barrels last
year.

“They’re trying to compete with Bud, Miller and Coors, and
that’s a fantastic goal,” said Dan Kopman, co-founder of Schlafly,
adding, “It’s going to take hundreds of millions of dollars to make
what they’re doing a reality, but I hope they can do it.”

The Kräftig team declined to disclose the scope of its
investment, but its ambitions, industry analysts say, make the
effort audacious and unusual.

“Four or five million barrels is enormously enthusiastic,” said
Eric Shepard, of Beer Marketer’s Insights, a beer industry research
company. “Those are very high expectations, and it would be
something if it actually happened. We’ll see. Never say never.”

Making a lager

With the takeover of A-B in 2008, many St. Louisans felt the
city lost a piece of its brewing heritage and a connection to the
colorful family at its center. Billy Busch feels the same
nostalgia.

“It dawned on me that there was no longer a Busch brewing beer,”
Busch said. “We’d done that for 150 years.”

So Busch began plotting a comeback. He settled on the idea of
brewing a lager, like Budweiser. “I’m comfortable with lagers,”
Busch says.

His team consulted master brewers in Germany and tried 10
recipes before settling on an all-malt brew, made with just four
ingredients and hewing to German purity laws. He chose the name,
which is German for powerful and used to describe someone who
overcomes obstacles. He hired an award-winning craft brewer, Marc
Gottfried, of the Morgan Street Brewing Co.

Yet the Kräftig team deliberately eschews the craft brewing
label, which would typically get tacked to an all-malt brewing
operation of its current size.

“In some sense, the Busch venture is following in the footsteps
of the most successful craft brewers,” said Maureen Ogle, author of
“Ambitious Brew: The Story of American Beer.” “It’s interesting
that he’s trying to avoid being labeled a craft brewer.”

Instead, Busch wants to position Kräftig as a premium mainstream
beer. At about $6.70 a six pack, it’s less expensive than many
craft beers, such as Sam Adams or Sierra Nevada, but more expensive
than Budweiser.

“The Busch project seems to want to have it both ways,” Shepard
says. “They’re trying to get a bigger piece of the mainstream pie
than craft.”

The industry is watching this strategy closely.

Over the last 10 years, mainstream beers have lost market share
as smaller craft brewers have gained sales. Beer sales overall will
decline for the third year in a row this year, while craft beer
will climb to about 6 percent of the market.

About 200 brewing companies are expected to launch this year,
nearly double the amount in any of the preceding 10 years. But most
of the brewers are tiny compared to Kräftig, and many are being
dubbed “nano-breweries.”

“This one is very different in that they’re not talking about
growing slow and organically,” explained Paul Gatza, director of
the Colorado-based Brewers Association.

Brewing lager beers generally requires a more sophisticated
brewing operation, so lagers favor well-capitalized projects, Gatza
said. Of the 1,876 breweries in the country, only 70 are lager-only
operations.

But thanks in part to Budweiser, lagers are the most-consumed
beers in the country, and Kräftig targets that appetite.

“They’re going for the heart of the market,” said Benj Steinman,
editor of Beer Marketer’s Insights. “It’s a more ambitious,
well-capitalized enterprise than any I can think of in recent
years.”

Still, the fledgling company faces huge challenges, aside from
an ailing beer market. Scaling up to a national level often
stretches resources too thin and dilutes a brand. The cost of
ingredients, especially barley, is shooting up as commodity grain
prices rise. The brand, like any new one, has to crack through the
fierce loyalty that many beer drinkers have forged with their
brands.

But Billy Busch and his team believe they have an ingredient
that can test that loyalty: the Busch name. And in St. Louis,
Kräftig’s first market, that name could be especially potent.

“The Busch family is legendary in its association with St.
Louis, but it was not a family-controlled company when it sold, and
there was a fair amount of bitterness about the sale locally,”
Steinman said. “I don’t know how the family name plays now.”

On the other hand, Steinman said: “He wasn’t in the company
before. He’s saying: This is my chance now.”

‘Archetypal playboy’

The family that created the King of Beers often was described as
St. Louis’ royalty. If that was the case, Billy Busch wasn’t born
to rule.

As the ninth of 11 children born to August “Gussie” Busch Jr.,
Billy Busch was far removed from the line of succession. When he
was 15, his half brother — August Busch III — seized control of the
brewery from their father in a move that A-B watchers described as
a palace coup.

Billy Busch continued to live with his father at Grant’s Farm,
the family estate in South County, and the French Renaissance-style
mansion there that always was kept apart from the animal park’s
visitors. He came of age surrounded by the reminders of the
family’s brewing history — Clydesdales and the trappings of three
generations of beer barons — but Grant’s Farm no longer was the
seat of the family’s power.

Billy Busch, now 52, learned to play polo at 13. As a young man,
he and some brothers were nationally ranked and played for A-B
affiliated teams. But other pursuits were what landed him in the
news throughout the 1980s.

In 1981, prosecutors declined to press charges after Busch bit
off another man’s ear during a late-night brawl outside a South
County tavern. Busch, then 22, told police that the other man
started the fight.

A year later, Busch was charged with assault after an employee
of a Naugles restaurant in Fenton accused him of reaching through
the drive-in window and striking him in the throat. Busch was
acquitted after testifying that the worker made an obscene remark
over a loudspeaker about Busch’s mother, and that his hand barely
grazed the worker.

Busch’s personal life made the Geraldo Rivera show during a
child-custody battle that, in an unusual turn of events, was
adjudicated by the Missouri Supreme Court. The court ruled in
Busch’s favor, but the majority opinion — written by Chief Justice
Charles B. Blackmar — was far from flattering.

“I cannot say very much in Busch’s favor,” Blackmar wrote. “He
is the archetypal playboy. He lives and ‘works’ at Grant’s Farm,
helping to train elephants and dogs for the public shows there and
tending crops and gardens.”

Blackmar criticized Busch for past drug use and for having a
passion for “transient pleasures.”

From 1986 to 1991, Busch and his brothers Adolphus and Andrew
owned Silver Eagle Distributors, an A-B wholesaler in Houston. The
brothers were forced to sell the company after a wholesaler
affiliated with Miller Brewing Co. complained to Texas regulators
that the brothers’ ownership violated a “tied house” law
prohibiting distributorship owners from having an affiliation with
a beer maker.

Billy Busch’s work at Silver Eagle was limited, but he enjoyed
pressing the flesh and selling his products in a personal way —
often by buying drinks for strangers.

It’s exactly what Busch was doing this month at O’Connell’s, the
landmark south St. Louis tavern that was built by Anheuser-Busch in
1905.

In 1997, the bar was the backdrop for a $100 million television
ad campaign that featured August Busch III talking about family
tradition. The 60-second spot, which the brewery at the time said
was largely unscripted, was the first time the company’s
then-chairman had appeared in a brewery ad.

Fast-forward to 2011, where Billy Busch stands just a few feet
from where his half brother sat in the commercial, talking again
about family tradition.

“Kreff-tig,” Busch says to an O’Connell’s patron who asks how
the new beer is pronounced. “We wanted a name that reflects my
family’s German heritage and its brewing heritage.”

Busch buys a beer for another customer, promising that —
although the beer is contract-brewed in Wisconsin — he’ll build a
St. Louis brewery soon.

“I used to do this sort of thing quite a bit as a distributor,”
Busch said later. “Traveling to accounts and talking about the beer
… I loved it.”

Talking to strangers, and having them want to talk to him, comes
naturally for Billy Busch, says his older brother, Peter, the owner
and chief executive of Southern Eagle Distributing, an
Anheuser-Busch wholesaler in Fort Pierce, Fla.

He said that, perhaps more than any of the Gussie Busch’s five
sons, Billy inherited their father’s magnetic personality.

“If people get to know Billy, they’re going to love him,” Peter
Busch said. “He’s a lot like my father in a lot of ways: He’s
outgoing, likeable, and I think he’s got a great beer.”

Repeat purchases

Rather than build a brewery right away, Kräftig chose to rely on
contract brewing so it could focus its money on ingredients and
growing a distribution network, a key in building the A-B
empire.

“Success in the industry depends on their ability to come to
agreements with wholesalers,” said Paul Gatza, director of the
Colorado-based Brewers Association.

The Busch name will likely open doors, and so will the
connections forged by the new company’s former A-B executives. But
the money behind the enterprise, analysts say, will have the most
clout with distributors.

“When they’re talking about millions of barrels, they know
there’s a lot of upside for them,” Gatza said.

This fall, Kräftig finalized deals with Summit Distributing and
Robert “Chick” Fritz Inc., both of which distribute Coors and
Miller products, in competition with A-B distributors.

“We’re not excluding A-B wholesalers,” Hoffmeister said.

But they worried A-B distributors would not promote Kräftig out
of fear it could cannibalize Budweiser sales.

Kräftig hopes to build a loyal customer base in St. Louis, then
expand into all of Illinois and Missouri starting in April.
(Kräftig, now sold in bottles, also will be sold in cans, beginning
in January.)

So far, wholesalers and consumers are responding to the brand.
After two weeks, Kräftig is in 25 percent of the stores,
restaurants and bars in the St. Louis region, outpacing the
company’s projections of 25 percent in the first month.

“We had high expectations for the brand, but it is performing
better than we thought it would,” said Kim Barrow, president and
chief operating officer of Summit. “We’re definitely getting repeat
purchases.”

The company has a “leg up” in St. Louis, Hoffmeister
acknowledges. “Will it be as easy in other places?” he asks.
“No.”

But the Kräftig team is optimistic. It has already been looking
for buildings or land in St. Louis, to build a brewery, though
Hoffmeister wouldn’t share details. In order to achieve the scale
they want, the company will need a brewery of a size that would
dwarf most craft brewers.

Sitting in the pub built by his ancestors, Billy Busch agrees
that the ambitious venture into his legendary family’s business
might seem quixotic. But, he says, the time just seemed right.

“My father — those are big shoes to fill,” he said. “But if that
genetic pool was passed down to me, then I’m fortunate.”

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